Ford going direct-to-consumer, no-negotiating for EVs?

I am obviously on one extreme of this conversation, but it comes from buying a few new cars, working at a dealership (in the used car section, but I did get to see the new car sales at work from behind the scenes) and buying a vehicle direct from the manufacturer. I'm also trying to look at the long timeframe, not just the panic of today. Eventually, supply and demand and prices will settle down to some sort of balance and then we'll be back to a more normal situation. Is it tough for dealers right now? Sure. Is that normal? No. Are the dealers adding any value? Well, there's the question isn't it.

Prioritizing repeat customers: that's an interesting one in business relationships. It's harder to get a customer the first time - so should you focus on courting new customers more, or focus on getting customers to come back? The latter is why loyalty programs exist, of course, and the former is why so many stores will offer you a discount on the first order. In both cases, you're basically giving a special deal that's not available to others to "buy" the business. In order to do that, you need extra margin you can afford to give away, which means that anyone who doesn't get the special price is paying more than you're willing to accept. This is annoying when it's 5% of $200, but scale that up to vehicle prices and it can be significant. Car dealers are outliers in that customers are very low volume but very high profit compared to other types of retail. 

SV reX said:

Keith Tanner said:

Can you order a car and get it delivered within 6-8 weeks? Yes. Of course, RIGHT NOW there are disruptions all over the place. But we're interested in moving forward, and it's been proven by manufacturers that it's possible.

Dealers as a buffer? Not really. They pre-select what they think will sell, so you actually are limited to what the sales manager has put on the lot. If you order from the manufacturer, you can get exactly what you wait straight from the warehouse so to speak. This also allows the manufacturer to keep smaller inventories. They know how to do it with the parts coming in to the factory, so they just do it with the cars coming out. It's scary compared to Honest Jims Discount Chevy Sales, but it gets rid of a lot of extra inventory sitting around.

One price fits all? Sure, if you want to pay a fair price and not whatever magic numbers the dealer is able to sneak past you. I've worked in a dealership, don't try to pretend they're trying to get the best deal for their customers. A dealer will never sell for less than a certain amount, but they'll sure as hell charge more if they can get away with it. THAT'S what pisses people off, the fact that it's a negotiated price where all the customer can do is not lose too badly. You said yourself you prioritize your favorite customers. How is that fair to a first-time buyer? It's not, they're second class in your dealership.

Service? There are hundreds of thousands of shops that can service cars that are not dealers. And there's at least one manufacturer doing it.

No one cares less than a manufacturer? The reason you think the manufacturer doesn't care is exactly because they don't have accountability, and the reason the dealer doesn't care is because they can blame everything on the manufacturer, they're just an intermediary and thus they have no accountability. Make them the same unit and all of a sudden there's your accountability and your direct contact.

Little league? Sure, whatever. That's advertising for your "home town dealer" that's more likely than not owned by a megacorp behind the scenes.

We all know why GM could only deliver a handful of EVs over the past three months. They've managed to deliver a whole lot more than that overall.

Those transport damaged cars are being sold with full disclosure of the repair, right? I know that they can't be sold if they're damaged beyond a certain amount (we got one of those from Mazda as a race car once), but I don't know if that's after they belong to the dealer or not.

Keith, you are one of the people I trust more than anyone on this site. But your bias is strong on this, and you are incorrect on many points. 

I would honestly be interested in  knowing where I'm incorrect.

Here's what all auto manufacturers are going to be looking at, and should have all the dealers quaking in the boots.  Study shows 87% of consumers dislike the dealership experience.  When close to 9 out of 10 people don't like you based on a century of E36 M3ty service, scams, rip offs, untruths, bait and switches, it's time your industry got a shake up.  

I appreciate your perspective on my writing Tanner.  But respectfully disagree just about everywhere. Ultimately feeling that you are viewing through the lens of "all people that look like that are XYZ" 'ism        1) Absolutely no way are you going to order and receive a vehicle from anyone in 6 to 8 weeks. Too many moving parts of manufacturing are broken currently. And even if they conjured one up magically, transportation is just as disfunctional if not somehow worse.      2) Your perspective of "all" dealers is apparently drawn from one or several that I personally would not work for. Sounds like a horrible place and I am sorry that you have that view. I work for a family owned store in a very nice town that has been in business for over 60 years. Not owned by some mysterious corporation. Quality people, quality business practice.    3) Dealers are absolutely positively the buffer. We do everything we can to get folks back on the road. Including providing dealer owned loaner vehicles. Cars and their usage are not free Sir. Our mfr did at one time provide a rebate towards loaners but no mas. If a part is not available or not even being made currently the mfr will simply tell us no eta known... 4) Laws on dealerships at least in our state are very comprehensive. Requiring more paperwork than even a home purchase sometimes. Federal law states that transport damage above $500 ( I think) must be disclosed in writing. Which I believe we all do.       5) Mr Thompson, you perhaps should have google'd your statement as I did before making it. 54% is still a terrible number agreed. But still again to state that all are the same is exceptionally flawed thinking. Which I am sure you were able to read as one of the very first lines in my writing. Further I personally believe this type of thinking to be one of the primary sources of trouble in this country.      6) Service can be performed many places including my yard by my young son. But warranty service can not. And if he put an off brand oil filter for a desoto in my new diesel truck by accident and it causes engine failure, I will have successfully voided the warranty.       7) One price: Most people "shop" vehicles and pricing. Most use this thing called the internet and some even have phones that they use even while negotiating.  I can't say that every one of our guests has done this so I'll just say comfortably that 99% plus do. Do you just walk into the known foulest big chain dealer of anything in a foul town and just say I'll take it? Really?   We gained some great repeat customers last year by selling exceptionally difficult to obtain vehicles at fair pricing. And sorry that your lens on life has this perspective in it. Personally I know several people named Keith and they seem to be solid human beings. And if I did know one whose perspectives did not line up with mine, I would not blame the others.     I should point out again that in my specialized side of the business that we have seen sometimes 5% of what we had before. If you sell fidgets and only get 5% of your desired normal inventory are you going to discount them heavily? That makes no sense.          8) Manufacturer.  I represent a manufacturer in whose product I believe in. Particularly in my specialized side of the business. But in my experience they absolutely will do nothing to help you should there be a challenge. And will in fact refer you to a dealer. Is your thinking that they will take it back to the plant and remanufacture it? No Sir, a human being in a nearby dealership will diagnose and physically repair it when the parts or perhaps fix become available. You will be speaking with the dealer only.     Further, Mfr's are currently wildly inconsistent in all areas of operation and practice. And we do absolutely act as a buffer between them and the guest. Who will you contact if your needed ordered work vehicle was supposed to be delivered six months ago? And who will do everything in their power to have delivery expedited even when every single piece is out of our control.        You did ask me to point out "any area in which I were wrong" Which this writing is.  Not interested in an endless dialogue with you Sir. And will give no more air space to this.  I can respect your perspective as being yours.  Although as previously very clearly stated, I personally find such blanket statements to be a reflection of very flawed reason.                         

In reply to SPG123 :

I haven't digested the whole thing yet, but your claim that it's not possible to order and receive a vehicle in 6-8 weeks is demonstrably false.  That's how the majority of the European market works, and has done for decades.  It was also possible here pre current situation, although as I pointed out earlier due to the instant gratification culture here 6-8 weeks was too long and people expect to get a vehicle the same or next day.

I agree that there's no way TODAY you can get a vehicle in a few weeks. You also can't find anything on dealer lots. Today is an anomaly. Think back three years. Was it possible then? It was, because I did it. Will it be possible in a couple of years? I believe it will, as supply/demand/pricing will settle. Maybe not exactly where it was, but it will settle.

I had to have a safety recall performed on my Dodge truck. The dealer kept saying they couldn't get parts, they were not willing to do anything for me other than put me on a list for replacement when the parts would arrive. "Don't worry, the steering on your 7500 lb vehicle will probably break at parking lot speeds". Eventually, a full year later, I got a replacement because I happened to call on the day some parts arrived. That list of people they were going to call was complete fiction, it was luck of the draw. In this case, the dealer was actively in the way of me getting a mandated safety repair because I couldn't deal with the manufacturer of the parts directly. That's the problem, the dealer is between the customer and the manufacturer. That buffer prevented me from talking to anyone who could actually do something. The dealership didn't have to worry about their reputation because hey, it wasn't their fault, it was the manufacturer. That's the lack of accountability. Of course the manufacturer will tell you to contact a dealer, they have to. That's the arrangement the dealers have made with the manufacturers and vice versa.  We, the people paying the money for the product, don't have the option to do it any other way. Some of us want that option.

Would another dealership have acted differently? Possibly. I have had a different dealer go far out of their way to make sure I could get home after a scheduled warranty repair was not performed in time. But you know what? The delay was their fault. They knew I was coming, they knew when, they knew what work was being performed and they knew I had to travel 5 hours to get there. So they were simply taking responsibility for their own actions. So the dealer wasn't a buffer here, they were the actual problem they were trying to solve.

The only reason that dealers are the only ones allowed to perform warranty service is because the manufacturer says so. There is nothing stopping a manufacturer from anointing other shops with that same power. That's important to remember, just because things are done one way today does not mean they have to be done that way tomorrow, and the limitation is not a real limitation but an artificial one.

Pricing - should I have to do a bunch of research to find out who is offering the product I want at the best price, and then walk in to face a professional negotiator? Or should I - or anyone - be able to walk into a big chain dealer anywhere and get the same price? I can buy a laptop that way. Why can't I buy a car that way? Are they really so different other than an extra zero on the price tag?

I understand that right now things are very difficult in the dealership business and that going direct to manufacturer would not really help get cars to people right now, as nobody has any inventory. But again, right now we are in an anomaly. It won't maintain. So we have to look at how things have worked up until the last year or so to determine how they might work a year or two from now.

In reply to SPG123 :

I'm thrilled that you took the effort to try to explain this from the dealer perspective. Thank you. 
 

Keith, your errors have been largely covered by our friend above. Let me add only a small amount...

I have been working in dealerships for the last 7 years, but my work is heavily limited and controlled by manufacturers. The specs are written by OEMs, the plans have to be approved by them. The products specced by the OEMs are inferior, ridiculously expensive, and iron clad. There are NO OPTIONS.  Dealers are forced to buy products the OEMs require with no room for negotiating. Some OEMs assist with financing (to "protect their brand"), but then require purchases from vendors they control (and get kickbacks). My last project was one if the big 3.  The OEM contributed $700K to the project, but then required $325K worth of furniture to be purchased from a vendor they partially owned. The quality of the product was inferior to what I could have purchased from IKEA for $30K. 
 

I am currently doing $4.8 million worth of work to a popular German brand. There was ABSOLUTELY NOTHING WRONG with it when I started. Maybe a few spots could have used paint touch up. But the OEM mandated the changes, and the dealer was forced to comply. Part of the current project includes removal and replacement of about 85 LF of aluminum and glass curtain wall. We are replacing it with the EXACT SAME PRODUCT. Equal in all respects. Cost?  $84,000. Value added?  Absolutely nothing, other than 7 months of business interruption for the dealership. The OEM never even did a site visit during the design process. They just wanted new. 
 

There is SO MUCH STUPID I can't even describe it. I've worked for 13 different brands. They have ALL been horrible. 
 

Meanwhile, the OEMs are delivering only 6% of normal inventory for the next 2 months. The dealers have to try to maintain relationships with the loyal customers while the OEMs fail miserably. 
 

For 7 years I have been working for good, honest, dealerships who do everything they can to care for the customer, and watched the OEMs screw them.  I have never once seen an unreasonable dealer up charge attached to a car.

I have no love for dealerships. There are some really bad ones.  It's a broken system. But OEMs suck, and dealers get the blame for their part too.
 

If the system shifts to DTC, OEMs will show their ass, and will no longer be able to hide behind their dealers.

In reply to Keith Tanner :

Auto manufacturers don't manufacture most of their parts. Your steering part was not made by Dodge. 

When manufacturers start annointing repair shops, they will develop a preferred vendor system. I already work with many if their preferred vendors. They are terrible. And grossly expensive. 
 

I recently did a Jeep dealership. One of the required elements was a big fiberglass rock in front of the building for the vehicles to be displayed climbing. 
 

The rock came in 4 large fiberglass pieces. The preferred vendor was the ONLY one allowed to install it. It took 1 man 3 hours to bolt it together (after he finished his coffee).  No helper. No crane or lifting equipment. Just an adjustable Crescent wrench. Anyone on this board could have done it with no experience or instructions. 
 

The bill for the preferred vendor for installation only was $10,000. 
 

The "Rock Guy" is pretty smart. That's all he does. Drives around the country bolting together fiberglass rocks.  
 

OEM preferred vendors repair shops will be a hoot. 

You've identified another issue. Dealers solely handle parts because MANUFACTURERS decided they wanted it that way. That how they retain proprietary control over all the software, programming info, parts supplies, etc. 
 

Manufacturers are not gonna like transferring authority to all those proprietary systems and processes that they have carefully constructed over the last 100 years. 
 

OEMs will have to blow open the very security gate they have created to try to keep people away from their proprietary property and make it available to the very people they have protected it against for decades. 

In reply to SV reX :

Your point about manufacturer requirements for the physical nature of their dealerships are understood.  I get that you see waste in the updates, but the price of having a dealership franchise is adhering to the mothership requirements.  Much the same way that McDonalds doesn’t allow franchisees to hang chick-fil-a signs outside their buildings.  In fact, having a GM or Ford franchise is one of the paths of least resistance to becoming a millionaire in this country.  Spending money to make money is the norm in sales and will continue to be so regardless of how silly it is to pay the Jeep fiberglass cube guy 10k.  B to B sales are what makes Larry Ellison a billionaire, and he doesn’t even bolt anything together with even a crescent wrench.

As was stated elsewhere in this thread, somewhere north of 80% of people find no value in the dealership experience.  All this arguing here won’t amount to a hill of beans cause at 80%  dissatisfaction, the model won’t survive that much longer.  Carmax, Carvana, Vroom all are making bets that people want less friction in their used car purchases.  SVrex, I don’t remember you decrying the absolute destruction of the business of BlackBerry.  The market that BlackBerry had led, was disrupted by new tech and BlackBerry failed to make the changes necessary.  Auto dealers are in much the same position today.  The market is being disrupted and the pace of disruption is increasing exponentially.  The dealer reactions are typical of entrenched businesses, but they are ill equipped to battle this new competitor because it requires fundamental change to the model that makes the auto dealer possible.  

No business gets a guarantee to exist even with franchise laws that are ludicrously favorable to the entrenched dealers.  Tesla has already shown the way forward and more will follow that path including existing manufacturers through various sleights of hand.  

Tesla isn't exactly the best example. Or maybe they are, of just how badly DTC can be.

Tesla shares nothing with anyone. They won't sell parts to body shops who aren't "Tesla Certified". Parts take forever to get (even pre-pandemic). The dealers and body shops charge basically whatever they want because you can't go anywhere else.

This all seems to work for them at present because Tesla buyers are fanatics and are willing to tolerate it. But mainstream car buyers won't sit still for it over time. 

I like the Tesla product but would never buy one based on my experiences trying to get the damn things fixed.

SV reX said:

You've identified another issue. Dealers solely handle parts because MANUFACTURERS decided they wanted it that way. That how they retain proprietary control over all the software, programming info, parts supplies, etc. 
 

Manufacturers are not gonna like transferring authority to all those proprietary systems and processes that they have carefully constructed over the last 100 years. 
 

OEMs will have to blow open the very security gate they have created to try to keep people away from their proprietary property and make it available to the very people they have protected it against for decades. 

My thinking on that is about 180 degrees the other way.  I don't think the OEM could just cut the dealers loose overnight.  Maybe some of them, kind of like what happened during the GM bankruptcy.  Perhaps there would be a certain threshold where the OEMs would stop dealing with smaller operations in areas with "good enough" coverage already and maybe dealers that have older or smaller facilities or shops that lack the latest whizbang tools or training - the ones that didn't do the electric car upgrades, for example.

In order to keep them around to do the end-customer delivery portion of the sales process, I could see sweetening the pot for them by increasing the amount of special tools and diagnostic equipment.  Yeah, we're going to take away the vehicle sales but we're going to make you even more profitable by putting more pressure on owners to come back to you for service.  They might increase the amount of telemetry data that is collected and stored by the OEM - and only accessible by your certified store for, you know, privacy? reasons to absolutely protect the consumer and not just to lock out third party shops, of course.  They'd be pushing for more DRM-enabled parts, even if they don't really need to be, much like the printer industry has been doing.  Oh, you need a new battery temp sensor?  Well, if it isn't properly programmed to the ECU with proprietary software your car will go in to limp mode. 

You're absolutely right that they won't want to transfer any of that IP to just anybody and I think their solution will be to double-down on it and transform the current dealer network into a service network.

Unrelated to this particular subject, there was a dealer here locally that for years advertised that they had been in the same location for 50 years or something like that.  It was an older building with a fairly small lot in the downtown Covington area and they sold a decent number of Chevys.  Their ads showed a cartoon car trying to pull away while chained to a cartoon representation of a shiny new building with the tagline that when you buy a car why should you pay for a new building?  In the late 90's or early 2000s, GM basically told them that if they didn't build a new facility, they'd lose their franchise.  So they bought some land, built a giant new place, and moved the dealership.  A couple years later, in the great GM bankruptcy, the General said that they didn't have enough business so they lost their franchise anyway. 

SVreX's latest posts have me wondering how much cheaper cars could be without buildings that get new facades for no reason, madly overpriced furniture, and fiberglass rocks that cost $10k to bolt together. Even if the manufacturers are complete bastards, if there's any competition, removing these madly overpriced showrooms from the equation should drive prices down. And if dealerships aren't there to act as a hate-sink any more the manufacturers won't be able to get away with much evil berkeleyery without losing customer sentiment - either they need to treat customers well, or buyers will give more preference to used cars, and new cars won't depreciate so sharply when driven off the lot, which seems like a generally more sane situation IMO.

Average new car cost $44K.  Average dealer profit 7-13%, so $3-5.7K per car.  I'm seeing average number of sales per dealership per month, but going on the low end of 100, that's 1,200 per year.  Even at 'only' $3K per car profit, which is unlikely, especially in this market.  and that's at least $3.6mil per year profit from cars.  Now sure, you've got huge overheads, but that's still a lot of money even on the low end to have to suck up $10K fiberglass rocks.

Now sure, there are hundreds of dealers below that threshold who may be suffering, but that's business and progress.  Should those dealers be guaranteed sales, targets, profits, or even to stay in business?  The owners aren't  guarantying jobs for their workers, so why should the consumers or manufacturers guarantee the owners continued position ?

In a country that decries hand outs and guarantees of income to individuals as socialist crap, the dealers sure seem have given themselves a lot guarantees in law at the cost of the consumer.

Here's a thought.  Cable TV companies are/were one of the most hated groups out their for their bundling, pricing, customer services etc (Sound familiar).  In the seven years from 2015-21 adult households with cable TV has dropped 20% from 76 to 56%.  The drop started before that, and is rate of cord cutting is increasing.  What have the companies done?  set up their own streaming services to compete with Netflix, Amazon and Hulu etc. or at least done deals where they get revenue for letting them be shown on a different platform.

Dealers are equally hated, and manufactures are starting, with the impetus from Elon the Bond villain, to do something about it.  Dealers can either whine like cry babies that it's not fair, or do something about it themselves and adapt and change.  They could try not fleecing people, not overcharging people, offering good service, hell, just become a service center for a manufactures where you don't need fancy showrooms and massive vehicle inventory, you can build a stunning high end waiting room in you Mercedes dealer for much less than a show room.

I am so sick of the attitude that any protections for individuals be it health, income, or shelter is shouted down as being socialist and not American, yet there are so so many cases of legacy industries being propped up by government regulations, tax breaks, and laws against competition.  Can you imagine the outcry if supermarket check out workers tried to get laws passed that supermarkets must use them to make sales and outlaw the supermarket selling direct to the customer with self check out? They'd be laughed out of the room.  But because your an industry association it's good business.  We are a bunch of hypocrites in this county at times.

GameboyRMH said:

if dealerships aren't there to act as a hate-sink

That's a brilliant and accurate term to describe dealers. All that profit given up to the dealers may simply be worth it to the manufacturer compared to actually having to run their own businesses.

Adrian_Thompson (Forum Supporter) said:

I am so sick of the attitude that any protections for individuals be it health, income, or shelter is shouted down as being socialist and not American, yet there are so so many cases of legacy industries being propped up by government regulations, tax breaks, and laws against competition.  Can you imagine the outcry if supermarket check out workers tried to get laws passed that supermarkets must use them to make sales and outlaw the supermarket selling direct to the customer with self check out? They'd be laughed out of the room.  But because your an industry association it's good business.  We are a bunch of hypocrites in this county at times.

I think (or rather hope...) it's more that we just haven't gotten there yet. As in, you can't fix everything all at once but when enough people decry one situation it falls. Then it's on to the next. Why say 'leave the broken dealer system alone' just because there are other broken systems out there? Let's just work our way through them, improving as we go.

In reply to Adrian_Thompson (Forum Supporter) :

Respectfully disagree.

In reply to mattm :

I am not defending dealerships. I've said that several times in this thread. I have no love for them. If they become obsolete, so be it. 
 

I am pushing back on absolutists in THIS thread who claim ALL dealerships are terrible. Or that the buying experience WILL improve if we can deal with manufacturers directly. Both of those are false.
 

In reply to mattm :

I agree part of the cost of a franchise is adhering to the mother ship. That is a given. No issue. 
 

My point was that manufacturers don't give specifications to adhere to.  They assign preferred vendors who offer inferior products.  
 

I've  worked for many franchises that don't have that problem.

By mandating what vendor must be used they create false markets and force the cost to the end line customer, while allowing their middle men (dealers) to take the heat. 
 

Folks here are claiming dealers offer no value, but fail to see the areas in which manufacturers offer zero value but force end line customers to pay the price.

Thats not gonna change.  The improved experience consumers are hoping for will end up buried in the preferred vendor process. Instead of manufacturers trying to promote their brand through their licensed dealers, they will he attempting to promote it through thousands of independent vendors who don't have the same relationship or loyalty. 
 

This will equate to large price increases to end line consumers with major degradation in the quality of service.  Manufacturers have already proven they are good at that. 
 

SV reX said:

In reply to mattm :

I agree part of the cost of a franchise is adhering to the mother ship. That is a given. No issue. 
 

My point was that manufacturers don't give specifications to adhere to.  They assign preferred vendors who offer inferior products.  
 

I've  worked for many franchises that don't have that problem.

 

By mandating what vendor must be used they create false markets and force the cost to the end line customer, while allowing their middle men (dealers) to take the heat. 
 

Folks here are claiming dealers offer no value, but fail to see the areas in which manufacturers offer zero value but force end line customers to pay the price.

Thats not gonna change.  The improved experience consumers are hoping for will end up buried in the preferred vendor process. Instead of manufacturers trying to promote their brand through their licensed dealers, they will he attempting to promote it through thousands of independent vendors who don't have the same relationship or loyalty. 
 

This will equate to large price increases to end line consumers with major degradation in the quality of service.  Manufacturers have already proven they are good at that. 
 

 

You and I agree on many items here.  Yes, the preferred vendors are always significantly more expensive than what could be done.  Preferred vendors are somehow always related to a manufacturer principle and also somehow always above any audit that the manufacturer would levy at other entities.  Trust me, I get it.

Let's talk about how it could be and is right now at Tesla,  in my experience, which isn't exhaustive, but includes multiple Tesla showrooms in the Midwest.  The Tesla showroom is near some higher traffic area such as a mall.  My closest Tesla showroom, and where I picked up my car and have taken it for service, is near a local popular outdoor/indoor mall.  It is in a former HH Gregg store, think Best Buy, right next to a large Lexus dealer.  The lot outside is what you would expect of a large electronics store and the showroom is actually not that large.  They use significant space for service and to store cars prior to delivery.  No large fiberglass rock that needs special assembly from the cousin to the CEO of Jeep.  The showroom consists of a couple of iMacs and a floor plan that allows for 3 vehicles.  There are paint and interior samples on the wall and a few large pictures of the cars.  That's it.  The waiting room for the service area is not that luxurious at all,  there are a few seats, Wi-Fi and a coffee maker.  
 

I'm going to use the service comment to segue to the next issue that independent dealers are going to have to deal with going forward.  EVs have far fewer parts and require far less frequent service.  I don't even have to rotate tires on my AWD Model S. Dealers make a significant portion of their income from service, that won't go to zero with EVs, but it will certainly be reduced by a significant percentage.

if you combine the desire, by a not insignificant portion of the population, for a simple experience, the desire of the auto OEMs to improve the customer experience, and the loss of a significant portion of service income, the traditional dealer is in a very bad spot going forward.  It's going to take years, but the writing looms large on the wall... 

In reply to mattm :

I agree.  Dealerships are in a tight.

The difference between the Tesla experience you are describing and traditional dealer experience is that Tesla BUILT that sales and service system from the ground up with the express purpose to disrupt the existing and capitalize on loopholes.

The existing dealer network was built by the MANUFACTURERS.  They will have to dismantle the very system they built and try again.

Sounds like the wolf guarding the hen house.  I don't trust manufacturers to accomplish that, and see no evidence that they will be skilled at it. It's like a cruise ship or a cargo ship trying to do the job of small ferry boat.

Honestly, I don't see it as an A/B choice.  I think the system is ripe for an entirely new "C" option.  I think service and sales brokers could step in with an entirely new Tesla-like system functioning as preferred vendors of the manufacturers and be far more likely to succeed than the manufacturers.

OEMs are not going to do well dismantling the system they spent 100 years building.

SV reX said:

In reply to SPG123 :

I'm thrilled that you took the effort to try to explain this from the dealer perspective. Thank you. 
 

Keith, your errors have been largely covered by our friend above. Let me add only a small amount...

I have been working in dealerships for the last 7 years, but my work is heavily limited and controlled by manufacturers. The specs are written by OEMs, the plans have to be approved by them. The products specced by the OEMs are inferior, ridiculously expensive, and iron clad. There are NO OPTIONS.  Dealers are forced to buy products the OEMs require with no room for negotiating. Some OEMs assist with financing (to "protect their brand"), but then require purchases from vendors they control (and get kickbacks). My last project was one if the big 3.  The OEM contributed $700K to the project, but then required $325K worth of furniture to be purchased from a vendor they partially owned. The quality of the product was inferior to what I could have purchased from IKEA for $30K. 
 

I am currently doing $4.8 million worth of work to a popular German brand. There was ABSOLUTELY NOTHING WRONG with it when I started. Maybe a few spots could have used paint touch up. But the OEM mandated the changes, and the dealer was forced to comply. Part of the current project includes removal and replacement of about 85 LF of aluminum and glass curtain wall. We are replacing it with the EXACT SAME PRODUCT. Equal in all respects. Cost?  $84,000. Value added?  Absolutely nothing, other than 7 months of business interruption for the dealership. The OEM never even did a site visit during the design process. They just wanted new. 
 

There is SO MUCH STUPID I can't even describe it. I've worked for 13 different brands. They have ALL been horrible. 
 

I'm noticing a lot of this type of "remodel" with chain restaurants, both sit-down and fast. They go in there (especially during COVID), rip everything out, close the inside for anywhere from a few days to a few months then you go in there afterward and you either can't tell they did it or can barely tell. I know pop culture and aesthetics have changed only glacially over the past 20 years as compared to the 50 years before it, but this is ridiculous! In the '90s when they'd tear out the '70s orange and brown for a bunch of mauve, seafoam green and light gray at least you could tell they got their money's worth!

SV reX said:

In reply to mattm :

I agree.  Dealerships are in a tight.

The difference between the Tesla experience you are describing and traditional dealer experience is that Tesla BUILT that sales and service system from the ground up with the express purpose to disrupt the existing and capitalize on loopholes.

The existing dealer network was built by the MANUFACTURERS.  They will have to dismantle the very system they built and try again.

Sounds like the wolf guarding the hen house.  I don't trust manufacturers to accomplish that, and see no evidence that they will be skilled at it. It's like a cruise ship or a cargo ship trying to do the job of small ferry boat.

Honestly, I don't see it as an A/B choice.  I think the system is ripe for an entirely new "C" option.  I think service and sales brokers could step in with an entirely new Tesla-like system functioning as preferred vendors of the manufacturers and be far more likely to succeed than the manufacturers.

OEMs are not going to do well dismantling the system they spent 100 years building.

There are a lot of moving parts here and, I think, multiples ways this could shake out.  The only completely non viable option to my mind, is no change.  They VW EV model is to allow the customer to order online with a fixed price, and an agreed upon margin (unknown by the customer) that has been negotiated between VW and its dealer network.  This is the least capital intensive option from VW themselves and keeps them out of court with the dealer lobby.  How successful it will be as the EV sales displace ICE in volume remains to be seen.  If dealer profits drop many years from now, I would assume they could make things difficult for VW.

GM has been reducing dealers post bankruptcy everywhere they can. Imposing new requirements for EVs that show some dealers self selecting out of the game.  This seems to be the path for the Koreans as well, just less self selecting out for EVs. 
 

Ford seemed on a similar path until this year, where they have made it known that they will split the ICE and EV business.  I'm certain that they could stipulate that the new organization isn't obligated to honor the franchise agreements made previously by the ICE organization.  Will Ford E go that way?  Will they build their own Ford E network as Tesla have done?  Tesla just opened two new plants which should be enough to double their output, and they started work to double the size of the Shanghai plant.  They are sold out of everything but the Model 3 for a year and the Model 3 for 3-6 months.  Ford has sold out of V1 lightnings and V2 will be a completely new design.  The race is on, and it is has been fun to watch so far.